IHT planning tool launched by HMRC dubbed “welcome” – can it save you time and money?
Because there are so many variables, inheritance tax (IHT) can be a difficult expenditure to manage. In light of this, HMRC has released a free IHT planning tool to assist families in navigating the procedure.
If the whole estate worth exceeds £325,000, inheritance tax is normally levied on the estate of someone who has died and is passing on their assets. In most cases, IHT is levied at a rate of 40%.
Only the portions of the estate worth more than £325,000 are subject to the 40% tax.
For example, if an estate is worth £400,000, 40% of £75,000 is deducted.
In its most basic form, this is how IHT is calculated, but there are many factors that influence the final amount paid.
The usage of trusts, charitable donations, and gifting to family members can all affect IHT planning.
In light of the complexities of estate planning, HMRC has just released a new IHT guidance tool to assist customers who are inexperienced with the procedure and require assistance.
Users can use this tool to determine whether they will be required to pay IHT, what forms will be required, and how obligations can be lowered, among other things.
It will also lead users to information on probate, which is another aspect of estate preparation that might have an influence on IHT fees.
HMRC stressed that the tool is not an IHT calculator and should only be used for basic information when launching it.
The launch of the tools was discussed by Kim Jarvis, a technical manager at Canada Life.
“IHT is a complex area of financial planning by its very nature,” Ms Jarvis said, “but this tool should be useful to individuals who are unfamiliar with the procedure and the forms that must be completed.
“Although HMRC has said that the tool should only be used as a guide, it will reveal whether the estate would be subject to IHT.
“The tool is not a calculator, and it is clear that it does not replace sound financial planning or the function of guidance, but it is a positive step forward by HMRC.”
The IHT threshold will not be modified until at least 2026, according to Rishi Sunak, who confirmed it in March.
In order to assist struggling families, the Chancellor made this commitment, as well as freezing a number of other tax rates.
“Our answer to.”Brinkwire Summary News,” Mr Sunak acknowledged at the time.